Characteristics of Insurance Flashcards
“The undertaking by one person to indemnify another person against loss or liability in respect of a certain risk or peril to which the object of insurance may be exposed…or to pay a sum or money or other thing of value upon which the happening of a certain event.” What is this called?
Insurance.
What parties contract for insurance? What are the roles and responsibilities of each party?
The Insurer = the insurance company.
The Insured= the insurance buyer.
What options does the insurer have when settling a claim?
In the form of a sum of money or other thing of value.
When determining the amount of indemnification, the insurer considers three criteria. What are they and ultimately on what basis is the final payment made?
a) The actual cash value of the property at the time of the loss, destruction or damage;
b) The interest of the insured in the property; or
c) The limit of insurance provided by this policy in respect of the property lost, destroyed or damaged.
Explain how actual cash value is determined.
It is the fair market value of property, at the time of the loss.
What are valued policies?
They are special agreements between the insured and the insurer.
Who has an insurable interest? If more than one person has insurable interest in the loss, how is the amount each is to be paid determined?
A person. An adjuster must determine what percentage is owned by the insured.
Which of the following types of losses are covered :
a) Fortuitous losses
b) Expected losses
c) Future losses
d) Losses that have already occurred
Fortuitous losses and Future losses.
Explain insurance as a means for spreading risk.
The ability to contribute to a fund - to share the losses of the few among the many - is the major function of insurance.
How is insurance the basis of our credit system?
It facilitates the granting of credit and protects the investments of borrowers and lenders.
How does insurance promote entrepreneurship?
It allows people and businesses to engage in many ventures. Insurance reduces anxiety associated with los and absorbs the financial burden that is a consequence of loss.
Private insurers may take the form of stock company or a mutual. How do these differ?
Stock Companies are owned by shareholders, individuals or institutions.
Mutual Companies are a corporation owned by its policyholders.
What type of insurance plans do Government Insurers provide?
Medical Insurance, Employment Insurance, and Worker’s Compensation.
There are two distinct organizations that transact insurance in Canada; what are they?
- Private Insurers
- Government Insurers
What are the most common ways insurance is transacted by private insurers in Canada?
a) Stock Companies
b) Mutual Companies
